An Indian company in a foreign group often needs its accounts to follow the parent's year so they can be consolidated abroad. This article covers when the law allows that, how the position differs from the Companies Act, 1956, and the five steps of the application.
Definition: Section 2(41)
"Financial year", in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up.
Section 2(41), Companies Act, 2013
The first proviso to Section 2(41) provides that where a company or body corporate which is a holding company, subsidiary, or associate company of a company incorporated outside India is required to follow a different financial year for consolidation of its accounts outside India, the Central Government may, on an application made by that company, allow any period as its financial year.
Comparison with Companies Act, 1956
Under the new regime, the definition of financial year is more particular and limited with respect to the April–March year concept. Under the old Companies Act, 1956, there was no such restriction. As per Section 2(17) of the Companies Act, 1956, the financial year could have been more than 365 days or up to 15 months. It was optional for companies to follow a financial year as a calendar year or as 15 months.
As per Section 210(4) of the Companies Act, 1956, the period could be less or more than a calendar year, but it could not exceed fifteen months, with a provision for extension up to eighteen months where special permission was granted by the Registrar. There is no corresponding provision of Section 210(4) of the Companies Act, 1956 in the Companies Act, 2013.
After the Companies (Amendment) Ordinance, 2018, the power to adjudicate applications for change of financial year has been shifted to the Central Government (Regional Director) from the Tribunal.
First financial year
Any company incorporated on or after 1st January of the year has the liberty to extend its first financial year up to 31st March of the following year.
Example: XYZ Limited is incorporated on 12th January 2019. XYZ Limited may keep its first financial year from 12th January 2019 to 31st March 2020.
Whether or not that period is a year
As per the first proviso of Section 2(41), holding companies, subsidiaries, or associate companies of a company incorporated outside India, which are required to follow a different financial year for consolidation of accounts, may apply to the Central Government for change of financial year. There is no restriction on such companies regarding the duration of the financial year. Many countries allow preparation of accounts from Christmas to Christmas, 360-day financial years, or otherwise.
Financial year under various Acts
| Statute | Position |
|---|---|
| Income-tax Act, 2025, Section 3 (from 1 April 2026) | "Tax year" is the twelve months of the financial year beginning 1 April; for a business set up during the year, it runs from the date of set-up. It replaces the "previous year" and "assessment year" of the Income Tax Act, 1961. |
| General Clauses Act, 1897, Section 3(21) | "Financial Year" shall mean the year commencing on the first day of April. |
| GST law (CGST/SGST Act, 2017) | Financial Year is not defined. Section 2(106) defines "Tax Period" as the period for which return is required to be furnished. |
| Union Budget | The Government of India prepares and follows the April to March financial year. |
Procedure for change of financial year
The process for changing the financial year involves five steps:
- Board resolution. Calling and passing of a Board resolution for change of financial year of the company as per Section 2(41) of the Companies Act, 2013.
- Preparation and filing of application in e-Form RD-1.
- There is no fixed format prescribed; it is advisable to use NCLT-9 as per the requirement of the application.
- Copy of Minutes of Board Meeting, including details of votes cast in favour and/or against the resolution.
- Power of Attorney or Memorandum of Appearance.
- Details of any previous application made within the last five years for change in financial year, and outcome thereof along with copy of order.
- A copy of the justification/request letter from the holding, subsidiary, or associate company regarding consolidation of accounts.
- Filing of GNL-2. Simultaneously filing of GNL-2 to the respective Registrar of Companies. The detailed application along with annexures shall be attached in GNL-2.
- Examination by Regional Director. The Regional Director will examine the application and may call for further information. Any incompleteness must be re-submitted within fifteen days in e-Form No. RD GNL-5.
- Approval and filing of order in INC-28. Filing of the RD order in INC-28 within 30 days of receipt of the order.
Filing under Income Tax and GST
Statutory filings under the Income-tax Act, 2025 and GST law shall be prepared and filed as per the April–March financial year concept, whereas statutory filings under the Companies Act, 2013 would be as per the approved application. The financial year is important for Sections 96, 123, 129, 134, 143, 182, 197 and Schedule V of the Companies Act, 2013.
Conclusion
The April–March year is the rule. A different year is available only to a holding, subsidiary or associate of a foreign company that needs it for consolidation abroad, and only with the Central Government's approval through the Regional Director. Before applying, check that:
- the company has that relationship with a company incorporated outside India;
- the foreign company's letter explaining the consolidation requirement is on record; and
- someone is responsible for filing the order in INC-28 within 30 days of receiving it.
Income-tax and GST filings continue on the April–March year.
Updates to this Article
| Date | Change | Amending instrument |
|---|---|---|
| 18 May 2025 | First published | — |
| 4 Sep 2026 | Reviewed | — |
| 1 Nov 2026 | Income-tax position updated to the Income-tax Act, 2025 | Income-tax Act, 2025, in force from 1 April 2026 |
Legal Sources and References
- Companies Act, 2013: Section 2(41) and its first proviso (India Code)
- Companies Act, 1956: Sections 2(17) and 210(4) (India Code, PDF)
- Companies (Amendment) Ordinance, 2018
- Income-tax Act, 2025: Section 3 (Income Tax Department)
- General Clauses Act, 1897: Section 3(21) (India Code)
- Central Goods and Services Tax Act, 2017: Section 2(106) (India Code)
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